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Deyaar’s got a plan

Deyaar’s got a plan

Dubai-based developer Deyaar confirmed it will go ahead with half its projects, but it’s bracing itself for a rough year.

April 28, 2009 11:08 by

Dubai-based real estate developer Deyaar Development Company confirmed that 50 percent of its projects are under construction, but suspects further defaults by investors, reports the Wall Street Journal. “The problem is my customers can’t pay,” Markus Giebel, Deyaar CEO, said.

The developer posted a 73 percent drop in its first quarter earnings this week, dragging the Dubai Financial Market’s general index by 4.3 percent to 1,568.52. Deyaar’s shares have lost over 9 percent since April 20.

Earlier this week, the developer launched a number of funds valued at AED1 billion to buy distressed debt, including its own, in order to boost returns for shareholders. The funds will be managed by the developer’s newly established Deyaar Fund Management unit.

“These funds have three benefits … to stabilize Dubai, take distressed assets from Deyaar’s balance sheet and bring some good returns for our shareholders,” Giebel told Reuters in a telephone interview on Monday.

Giebel claims the developer is close to raising the initial AED500 million fund to buy its own distressed assets, with 60-70 percent subscribed by local and overseas investors. The fund will be used to buy back properties owned by investors who have defaulted on payments, Giebel explained.

The company plans on renting the units until the market recovers, but will eventual put the properties back on the market.

“It [the market] can get worse … we believe 2009 will be a downturn, 2010 will be at the bottom somewhere and end 2010, 2011 there will be a recovery,” Giebel said.

Dubai’s real estate sector has suffered considerable losses since the financial crisis hit the region in September 2008.

The latest in a series of reports on Dubai’s property market claims prices have fallen 41 percent in the first quarter of 2009 compared with prices in the fourth quarter of 2008, according to Colliers International Q1 2009 House Price Index.

“Negative sentiment is the key factor driving the decline in the index and the availability of finance continues to impact the market,” Colliers International CEO John Davis said in a statement.

“End-users are concerned about job security and therefore unwilling to enter the market, even if finance is available to them, while the price/yield gap is tempting professional investors to wait for further declines,” he said.

Including the Burj Dubai development, the value of completed and uncompleted properties declined by 31 and 56 percent respectively. Excluding the Burj Dubai development, they declined 32 and 51 percent respectively.

The index claims the average rate for residential property fell by AED733 per square foot, from AED 1,770 to AED 1,037.

“On a more positive note, the Index remained unchanged in March 2009.  However, we would caution that it is too early to say whether the halt in the decline of the Index can be sustained, especially over the traditionally quieter summer months.  We expect the last quarter of 2009 to be a barometer for signalling future trends in the market,” Davis said.

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